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Monday, June 23, 2014

Interest Rates

David Miles, one of the Bank of England's Monetary Policy Committee (MPC), has written in the Telegraph that:
"It now seems to me much more likely that a normalisation of monetary policy starting at some point in my remaining year on the MPC will become appropriate."
Does that mean rates will rise in the next month or so?

No, rates will not rise yet.

For why?

Next year's general election needs to be out of the way first, before the government risks upsetting the voters. More to the point Professor Miles acknowledges that there is slack in the economy and as such "the stimulus given by very low interest rates is not something that has to be removed right now".

The media of course have missed the above two points and are screaming that interest rates will be raised in the very near future.

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